Wahlberg Design Partners (WDP) uses the aging method for its accounts receivable. On January 1, the balance in the allowance for doubtful accounts was $25,000. For the year, WDP made $2,560,000 of credit sales, wrote off $50,000 of accounts as uncollectible, and $850,000 remained outstanding at year-end. The following table is the aging schedule for these receivables:

During the year, WDP factored $600,000 of its receivables with recourse. The company received $550,000, net of a hold-back of $20,000 for potentially uncollectible accounts. Of the total amount factored, $585,000 was collected, and the factor made a final payment to WDP for $5,000.

Required:
a. Record the journal entries relating to the factoring transaction.
b. Determine the amount of bad debts expense for the year.
c. Show the journal entry to record bad debts expense for the year.
d. Show the journal entry that was used to record write-off s for the year.

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Days outstanding from invoice date 31–90 days $170,000 0–30 days > 90 days Total Balance outstanding, December 31 $850,000 $80,000 $600,000 Estimated default rate 2% 1% 5%